The Marginal Cost of Public Funds in Growing Economies

Hashimzade, Myles
2014 Annals of Economics and Statistics  
The marginal cost of public funds (MCF ) measures the cost to the economy of raising government revenue. The MCF can be used to guide reform of the tax system and to determine an e¢ cient level of government expenditure. It can also be used as an input into cost-bene...t analysis. Previous applications of the concept have developed a methodology in a context of a static economy. We develop the methodology of the MCF to extend the concept to growing economies. The extended concept is then
more » ... to variants of the Barro endogenous growth model with a productive public input. The MCF is used to address the choice between labour and capital taxes and to explore the implications of infrastructural spill-overs across regions. JEL Classi...cation: E6, H4, H7
doi:10.15609/annaeconstat2009.113-114.11 fatcat:2zyfpvpptnbdzbg2erln5ztbl4